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Gold And Energy Prices Drop Ahead Of Fed Meeting

After opening the month at $1,784 per ounce, the U.S. gold bullion price surged to $1,867 per ounce by mid-month. However, the price backtracked down to $1,785 per ounce as of the start of December.

Meanwhile, the U.S. dollar, which historically correlates inversely with gold, picked up momentum in November. After falling to just over 93 to close October, the U.S. dollar rose as a high as 96.88 as of Thanksgiving. Since then, the dollar fell closer to 96 before trading sideways.

Inflation at nearly 40-year high

Earlier this month, the U.S. government reported the Consumer Price Index for the last 12 months increased by 6.8%. Inflation is at its highest level in nearly 40 years.

According to the Bureau of Labor Statistics, the 12-month increase marked the largest jump since June 1982.

Gold prices also posted gains Friday on the heels of the latest inflation report.

Meanwhile, elsewhere in the inflation report, higher energy prices continued to weigh on consumers.

The energy subindex increased by 3.5% in November, albeit lower than the 4.9% recorded in October. For the 12-month period ending in November, the energy index increased by 33.3%.

Under the energy umbrella, fuel oil increases tapered in November, increasing by 3.5% after a 12.3% rise in October. For the 12-month period, fuel oil is up 59.3%.

As those in the hunt for a new or used car over the last year know, automotive prices have skyrocketed. The new car index is up 11.1% over the last year. Meanwhile, the index for used cars and trucks surged by 31.4%. As noted in the Automotive MMI, automakers continue to struggle with supply shortages and low inventory.

Treasury yields lose ground to close November

In other relevant indicators, the U.S. 30-year treasury yield fell from 1.98% on Nov. 1 to 1.77% as of Dec. 1.

In early December, however, the 30-year yield has picked back up, reaching 1.88% on Dec. 10.

Meanwhile, the 10-year yield opened November at 1.58% before falling to 1.43% as of Dec. 1. The 10-year yield reached 1.48% on Dec. 10.

Fed tapering

As noted in previous reports, the Federal Reserve previously announced plans to continue tapering of its asset purchase program started late last year.

“In light of the substantial further progress the economy has made toward the Committee’s goals since last December, the Committee decided to begin reducing the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities,” the Fed said last month. “Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $70 billion per month and of agency mortgage-backed securities by at least $35 billion per month.”

This month, it will increase holdings of Treasury securities by $60 billion per month and of agency mortgage-backed securities by at least $30 billion per month.


The Federal Reserve is scheduled to meet Dec. 14-15.

Furthermore, in early November, the Fed announced it will maintain the federal funds rate at 0-0.25%.

Actual metals prices and trends

The Chinese gold bullion price fell 0.11% month over month to $57.51 per gram as of Dec. 1.

Meanwhile, the U.S. gold bullion price dropped 0.49% to $1,776 per ounce. U.S. silver dropped 8.14% to $21.94 per ounce.

U.S. palladium bars dropped 9.29% to $1,757 per ounce. Meanwhile, platinum bars dropped 8.35% to $933 per ounce.

By AG Metal Miner

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